Paul Budde's History Archives

Financial and Political Crisis of 1866

Soon after independence Queensland had an enormous task ahead of building up a state and an infrastructure to support this new community. However, there were hardly any funds available to undertake the projects necessary to do so. The last few decades between the end of the penal colony and Independence it had been very much a situation of everybody for themselves, there was little sense of  community. Partly because there was no support or infrastructure to create a more cohesive community. Massive immigration brought in thousands of new people from all over the world, without any allegiance to the new State and/or the Town of Brisbane. Most just struggled to survive in those early years.

In 1859 both the Municipality of Brisbane as well as the State of Queensland was established. Also here, members of these two organisations were basically people who were used to look after themselves. This was reflected in the decision-making processes over the following year, this was basically a period of indecisiveness as there was an ongoing conflict of interest between the individual members of both government bodies as well as between the bodies themselves. It was a period that can be characterised by ‘muddling on’. There was a massive divide between the State Parliament – mainly mad up off rich squatters from the Darling Downs and Brisbane Municipality Council made up of merchants and business men. This was so bad that during various periods during the first 50 years these two groups hated each other.

As is often the case big projects were attracting more interest than the immediate local problems. The State was dominated by the squatters and landowner in the country and the Brisbane Municipality Council  by their local businessmen. All looking after their own interest within these government bodies. Many parliamentarians came from the legal profession and basically took up the voluntary job to sit in Parliament to further their own legal careers. Parliament set for only 50 days so it was not too much of an effort for them to combine both.

As railways was the latest development that excited the world there were many plans for it in the emerging State, even to build a railway to Cairns and from there to London! In the end the decision was made to build a railway from Ipswich to the Darling Downs (Toowoomba). There was no way that the government had enough funds to finance this project, so money had to be borrowed. This also meant that some of the local projects in Brisbane were pushed back.

At the local level Brisbane desperately needed among many other infrastructures a hospital , the supply fresh water, a fire brigade as well as proper roads and a bridge. While the State thanks to its rich landholders was able to start building a Parliament House and the Queensland Club, no money was forthcoming for city infrastructure. So also at this local level money needed to be borrowed.

So both the State and the Municipality became heavily indebted.  The situation was not helped with a serious draught that had started in 1865 and persisted into 1866. This coincided with what became known as “The Panic of 1866”. This was an international financial downturn that accompanied the failure of  a the wholesale and discount bank, the Overend, Gurney and Company in London (the bankers bank), and the corso forzoso abandonment of the silver standard in Italy. As a result, banks involved in lending the projects in Queensland became also involved in this crisis and collapsed. The three year old Bank of Queensland was one of the casualties. They were the key financiers of the new Brisbane Bridge. The construction was started in 1864, lack of funds saw the plans changed to a temporary timber bridge. However, the collapse of the Bank of Queensland saw the plans of a proper iron bridge abandoned. The project came to an hold, the timber bridge collapsed and it wasn’t until 1871 that a new bridge was built.

In order to address the financial crisis, the Government suggested to what would now be known as quantitative easing, but the local landowners and businessmen voted against this as ‘printing money’ would give the government an unfair disadvantage and would lead to inflation. As a result, projects such as the construction of Parliament House, the railways and the bridge were stopped and over 150 bankruptcies of local companies followed.  Some were heavily indebted as they had to rebuild their businesses after the fires from 1864.

Furthermore, as infrastructure projects were stopped, this resulted in large scale unemployment (around 2000 people).

The already weakly functioning political systems came under further pressure that lead to further inaction, add this to the non-existing social infrastructure and no wonder that riots occurred. Governments that had been borrowing heavily and now became embroiled in the financial crisis collapsed and new ones were formed that year. Eventually a financial crisis was avoided. However, by that time the damage was already done..

The most famous uprising was the Bread Riots, which lasted from 9 till 11 September.

On the last day of these riots some 500 people gathered at the Government House and started to throw stones and attempted to break and enter.

The following is a famous quote allegedly said by one of the leaders of the protest;

“We did not come here to be paupers, nor to accept of charity, but to work and work we cannot get, and bread we cannot do without – and bread we will have – if we don’t get bread we will have blood. And bread or blood we will have tonight -let us do it now.”

The Riot Act was read, and the military and the police fired gun shots. They led several charges and were able to push the protesters back to Queen Street and from there to Albert Street where they eventually were able to disperse the protesters.

Unemployment recovered the following year when gold was discovered in Gympie and some 15,000 diggers went to the gold fields, many of whom where those who had became unemployed during the crisis. For both businesses in town and the agriculture businesses in the country it wasn’t until the early 1870s before prices and profits started to recover. Apart from gold it was cotton and wool that resulted in the economic boom years of the 1870s and 1880s.

This in turn was followed by a severe banking crisis in the 1890s. It was an Australia wide crisis, but it hit Brisbane more severe than other places. The Queensland Premier of that time Sir Samuel Griffith, totally ignored the financial crisis and Queensland ended in a virtual bankruptcy. Disasters always come in multiples there were floods in 1889 and 1893 and a cyclone in 1892, they could not have come at a worse time.

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